Solar TAN Index having underperformed the market year-to-date, expectations of Chinese “pull-in” demand and the possibility of Hillary Clinton winning the U.S. Presidential election have resulted in the Solar sector rating being upgraded from Market Underweight to Market Overweight, Axiom’s Gordon Johnson said in a report.

Johnson mentioned four key reasons for the “new-found solar optimism” on the Solar sector:

China has proposed a FiT cut for July 1, 2017: This could result in an estimated ~25GW of Chinese “pull-in” demand in the first half of next year, suggesting a undersupply in the solar market, which would push prices higher.

Prices of substrates moves higher: Following several weeks of week-over-week declines, prices of multi-wafer and multi-cell substrates rose this week, on news of a significantly higher-than-anticipated FiT cut planned in China for 2017.

Clinton as President: During 2013-2015, over the December to March timeframe, the Solar TAN Index averaged a return of 19.9 percent. This has likely been on account of “non-fundamental sentiment tailwind sparking clean energy investors’ “animal spirits” – pushing clean energy funds to “refocus” on solar stocks,” Johnson wrote. He added that a possible H. Clinton Presidential election win could offer a similar impetus, “given her robust 140GW solar installation goal, even if unachievable.”

Underperformance of Solar TAN Index: The index has substantially underperformed the market this year, having declined 32.5 percent YTD, versus a 5.7 percent gain for the S&P 500.

“In short we see catalysts of both the fundamental & sentiment variety on the horizon, implying the time to BUY is now,” the analyst commented.

Do you have ideas for articles/interviews you'd like to see more of on Benzinga? Please email feedback@benzinga.com with your best article ideas. One person will be randomly selected to win a $20 Amazon gift card!